Battle to find insurance

Published:01:00Tuesday 31 January 2012

A NATIONAL property search company has warned that hundreds of homeowners may struggle to find flood insurance from this summer.

Research from SearchFlow estimates that property worth a total of £214billion could be left uninsured if nothing is done to fill the void of the Statement of Principles, agreed by the Government and insurance industry, that ensures cover is provided in flood risk zones if defence projects are planned.

The deal is due to expire in June 2013 and the Government is expected to make an announcement by April this year about how future flood insurance issues will be dealt with.

The Morpeth Flood Insurance Working Group has put forward a model whereby the costs of flood recovery will be met by a community levy on all households and removed from individual policies.

However, with no decision yet made on what will replace the Statement, SearchFlow says those in flood risk areas seeking to renew their cover this summer may find insurers unwilling to offer policies.

SearchFlow Business Development Director Richard Hinton said: “The end of the principles agreement between the Association of British Insurers and the Government could make flooding a hugely contentious issue during the conveyancing process when professional conveyancers have to consider the potential risks a property faces.

“Although buyers will be able to obtain flood insurance for the next few months, the long-term prospects of properties at risk of flooding are potentially bleak.

“Especially for buyers purchasing in a high-risk flood area, the possibility of very high premiums, significant reductions in value, less access to mortgage finance, even action taken by the mortgage lender due to breach of the mortgage agreement, is high.

“Conveyancers looking after their clients’ best interests must ensure they are aware of the risk of flooding and ensure their clients appreciate the danger posed by the end of the ABI agreement.”

Estimates suggest that the average bill for the repair of a flooded property is more than £30,000, and while the Environment Agency spends £300million a year on flood defences, it reports that 43 per cent of defences are in fair, poor or very poor condition.

Mr Hinton said: “The potential costs of flood damage dwarf the annual spend on defences and this is the main reason why insurers are currently reluctant to expose themselves to flood risk.

“One of the main principles in ABI’s agreement was that the Government improve flood defences in high risk areas. The fact this has not been done means an extension to the agreement is unlikely.

“This is worrying news for those buying in areas with high flood risk.”

The Morpeth Flood Insurance Working Group, Morpeth Town Council, the Morpeth Flood Action Group and Chamber of Trade are working together to lobby MPs for the group’s flood funding model to be adopted.

Funding for the Morpeth flood alleviation scheme was passed at a regional level on Friday, but still requires national approval from the Environment Agency Board next month.

Northumberland County Council has already committed around half the cash required for the scheme.